Succession management has been bantered about as a topic of interest in businesses and IT departments for several years. Recently, as the need for skilled talent has become more critical, there’s been an increased interest among IT shops.

Succession management—defined as making provisions for replacing key people—requires a clear understanding of an organization’s values and strategy. It also requires a proactive approach that ensures continuity by cultivating talent from within through planned development .

Companies that ignore the need for succession planning risk potentially devastating losses to growth and financial profits when any of the following events occur:

• Executives or managers depart from a company because of retirement, termination or death.

• Key performers leave for another enterprise.

• Promotions within a company leave a vacancy without a trained successor.

Still, 45 percent of companies with gross sales of more than $500 million do not have a clear succession plan, according to the National Association of Corporate Directors. Companies earning less than $500 million displayed even less planning. In startups and small companies, succession plans are nearly nonexistent.

See also: Characteristics of a Successful Succession Management Plan

Companies can experience tremendous financial losses when they’re unprepared for a key employee’s departure. Delays in finding a replacement are common. Due to the skilled labor shortages in technology, the time required to achieve successful replacement results has increased from three weeks to three months. During extended vacancies, projects are delayed, revenues go unrealized, accounts are lost, innovation gets sidetracked, patents fall by the wayside, overtime costs rise and employee morale drops.